Homework Answers
Sharpe ratio=(return-risk free rate)/standard deviation
Sharpe ratio of the lawn mowing business=(30%-2%)/40%=0.7
Sharpe ratio of the market index=(15%-2%)/20%=0.65
Lawn mowing business is better as it has higher Sharpe ratio
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5. You have the savings of $100K and no other wealth. You are considering whether to...
Please answer the questions above. Thank you! You manage an index fund that is an exact...
Please answer the questions above. Thank you!
You manage an index fund that is an exact replica of the market index. The market expected annual rate of return is 19.5% with a standard deviation of 16.5%. Annual T-bill rate is 4.5% 2. a. A client of yours wants you to invest 80% of his portfolio in your fund and 20 % in T-bill money market fund. What is the expected return and standard deviation of this client's portfolio? b. What...
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Please answer the questions above. Thank you!
You manage an index fund that is an exact replica of the market index. The market expected annual rate of return is 19.5% with a standard deviation of 16.5%. Annual T-bill rate is 4.5% 2. a. A client of yours wants you to invest 80% of his portfolio in your fund and 20 % in T-bill money market fund. What is the expected return and standard deviation of this client's portfolio? b. What...
(Security market line) James Fromholtz is considering whether to invest in a newly formed investment fund. The fund's investment objective is to acquire home mortgage securities at what it hopes will be bargain prices. The fund sponsor has suggested to James that the fund's performance will hinge on how the national economy performs in the coming year. Specifically suggested the following possible outcomes: . James has estimated the expected rate of retum from this investment is 23.00 percent. James wants...
Assume that you can invest $1,000 in a savings account or a fund consisting of different stocks. If you invest in the savings account, you get 1% interest per year. The fund has annual return X with expected value E(X) = 6% and standard deviation o(X) = 20%. This means that, compared to the savings account, the fund has a higher return on average, but also comes with risk. When you invest y dollars in the fund, you will have...
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